3 Stocks Raising The Computer Software & Services Industry Higher

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Two out of the three major indices are trading lower today with the Dow Jones Industrial Average ( ^DJI) trading up 11 points (0.1%) at 17,078 as of Wednesday, Sept. 3, 2014, 4:20 PM ET. The NYSE advances/declines ratio sits at 1,398 issues advancing vs. 1,669 declining with 141 unchanged.

The Computer Software & Services industry as a whole closed the day down 0.2% versus the S&P 500, which was down 0.1%. Top gainers within the Computer Software & Services industry included TSR ( TSRI), up 3.1%, Bridgeline Digital ( BLIN), up 2.0%, Peerless Systems ( PRLS), up 22.3%, Formula Systems (1985 ( FORTY), up 4.1% and QAD ( QADB), up 1.7%.

TheStreet Ratings Group would like to highlight 3 stocks pushing the industry higher today:

QAD ( QADB) is one of the companies that pushed the Computer Software & Services industry higher today. QAD was up $0.29 (1.7%) to $17.42 on light volume. Throughout the day, 1,563 shares of QAD exchanged hands as compared to its average daily volume of 3,200 shares. The stock ranged in a price between $17.17-$17.57 after having opened the day at $17.17 as compared to the previous trading day's close of $17.13.

QAD Inc. provides enterprise software solutions for manufacturers in the automotive, consumer products, food and beverage, high technology, industrial products, and life sciences industries Worldwide. QAD has a market cap of $54.4 million and is part of the technology sector. Shares are up 7.0% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates QAD a buy, no analysts rate it a sell, and none rate it a hold.

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TheStreet Ratings rates QAD as a hold. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income and feeble growth in the company's earnings per share.

Highlights from TheStreet Ratings analysis on QADB go as follows:

  • QADB's revenue growth has slightly outpaced the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 12.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Compared to its closing price of one year ago, QADB's share price has jumped by 65.18%, exceeding the performance of the broader market during that same time frame. Although QADB had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • QADB's debt-to-equity ratio is very low at 0.24 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.99 is somewhat weak and could be cause for future problems.
  • QAD INC's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. However, the consensus estimates suggest that there will be an upward trend in the coming year. During the past fiscal year, QAD INC reported lower earnings of $0.39 versus $0.40 in the prior year. This year, the market expects an improvement in earnings ($1.32 versus $0.39).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Software industry. The net income has decreased by 21.4% when compared to the same quarter one year ago, dropping from $1.25 million to $0.99 million.

You can view the full analysis from the report here: QAD Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

At the close, Peerless Systems ( PRLS) was up $0.81 (22.3%) to $4.46 on heavy volume. Throughout the day, 152,065 shares of Peerless Systems exchanged hands as compared to its average daily volume of 7,600 shares. The stock ranged in a price between $4.00-$4.80 after having opened the day at $4.00 as compared to the previous trading day's close of $3.65.

Peerless Systems Corporation develops and licenses software-based digital imaging and networking systems and supporting electronic technologies to original equipment manufacturers (OEMs) of digital document products located primarily in the United States and Japan. Peerless Systems has a market cap of $10.1 million and is part of the technology sector. Shares are up 0.3% year-to-date as of the close of trading on Tuesday. Currently there are no analysts who rate Peerless Systems a buy, no analysts rate it a sell, and none rate it a hold.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreet Ratings rates Peerless Systems as a hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and disappointing return on equity.

Highlights from TheStreet Ratings analysis on PRLS go as follows:

  • PRLS has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 49.98, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for PEERLESS SYSTEMS CORP is currently very high, coming in at 85.74%. Regardless of PRLS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, PRLS's net profit margin of 9.32% is significantly lower than the industry average.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market, PEERLESS SYSTEMS CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.93 million or 374.55% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

You can view the full analysis from the report here: Peerless Systems Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Bridgeline Digital ( BLIN) was another company that pushed the Computer Software & Services industry higher today. Bridgeline Digital was up $0.02 (2.0%) to $0.78 on average volume. Throughout the day, 41,230 shares of Bridgeline Digital exchanged hands as compared to its average daily volume of 29,700 shares. The stock ranged in a price between $0.74-$0.78 after having opened the day at $0.75 as compared to the previous trading day's close of $0.76.

Bridgeline Digital, Inc. develops iAPPS Web engagement management product platform and related digital solutions in the United States. Its iAPPS platform enables companies and developers to create Websites, Web applications, and online stores. Bridgeline Digital has a market cap of $16.4 million and is part of the technology sector. Shares are down 28.3% year-to-date as of the close of trading on Tuesday. Currently there is 1 analyst who rates Bridgeline Digital a buy, no analysts rate it a sell, and none rate it a hold.

TheStreet Ratings rates Bridgeline Digital as a sell. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from TheStreet Ratings analysis on BLIN go as follows:

  • BRIDGELINE DIGITAL INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, BRIDGELINE DIGITAL INC reported poor results of -$0.23 versus -$0.07 in the prior year. For the next year, the market is expecting a contraction of 39.1% in earnings (-$0.32 versus -$0.23).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet Software & Services industry. The net income has significantly decreased by 236.8% when compared to the same quarter one year ago, falling from -$0.69 million to -$2.31 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Internet Software & Services industry and the overall market, BRIDGELINE DIGITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$0.23 million or 138.55% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.78%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 160.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.

You can view the full analysis from the report here: Bridgeline Digital Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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